This blog looks at promoting investment and business in Fiji and is targeted at foreign investors as well as Fiji residents and former residents working abroad. We also post information and critique developments relating to the financial sector in Fiji.

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Monday, April 16, 2007

ANZ will not reduce interest rates

ANZ has said that it will not reduce its lending rates just yet.

The bank was responding to the move by Westpac Banking Corporation to reduce all its lending rates by 0.5% from 1 May 2007 in light of improvements in banking system liquidity.

Financial system liquidity is to improve further with the reduction of 1%, from 7% to 6%, in the Reserve Bank of Fiji's Statutory Reserve Deposits requirement from 1 May 2007.

Statutory Reserve Deposits are funds that banks have "locked in" as deposits with the Reserve Bank of Fiji. During a stipulated period, a bank may not withdraw these deposits from the Reserve Bank of Fiji for other use. Hence it is used as an instrument to control lending (or credit) in an economy.

Given the supposed failure of the Reserve Bank of Fiji's interest rate' monetary policy framework, it has resorted over recent years to directly controlling bank lending (or credit) through playing around with the proportion of funds that banks are to hold on deposit with the Reserve Bank.